Broker commission hikes: Where are they?

by Mackenzie McCarty14 Aug 2013

With all of the major banks and most smaller lenders announcing interest rate reductions in the past week – not to mention additional efforts on the part of NAB, CBA and Westpac to up their mortgage market share – a number of readers have begun to questions whether there’s a chance of broker trails enjoying a bit of a boost in the near future.

Aussie Home Loans CEO, Ian Corfield, says it’s a definite possibility – but brokers shouldn’t get too excited just yet.

“Funding costs have fallen, although it will take time for this to fully flow through into banks’ cost of funds as funding built-up in recent years rolls off. I'd love trail commissions to go up, but that would need to be on a sustainable basis.”

Corfield says this means there needs to be a margin to be shared over the lifetime of the loan – not just immediately.

However, he believes brokers will benefit from lower bank funding costs in other ways in the short-term, particularly when it comes to lower interest rates and added discounts for clients.

“Customers are getting the benefit of the current reductions via some great fixed rates - Aussie has just launched a two-year fixed at 4.64%, for example.”

As for exactly when brokers can expect to see lower funding costs manifest into higher commissions, Corfield’s answer is simple:

“When it’s sustainable.”


  • by Jack 14/08/2013 9:20:05 AM

    Talk and rhetoric. Margins are significantly (not marginally) better than they were; but Banks will always avoid paying until our industry shows greater signs of decay - I know, I worked there.

  • by Sydney Broker 14/08/2013 9:21:58 AM

    You cannot argue that its not sustainable. Banks are falling over themselves to offer increasingly large discount to clients. Discounts of 1% or more were impossible pre GFC unless you had a loan well over $1 million. These days they are often handed out. Make the discounts more reasonable and stop the pricing war. Then pay us the trails back.
    The industry willbe more sustainable with more trail and volumes will increase. Brokers can recruit and train and retain more staff. They can spend more on marketing and new business generation. Banks wait for clients to knock on the door. Brokers will go out and make it happen. We have to as we dont have the brand and multi million dollar marketing budget.
    With an increase in sustainable income, brokers will generate NEW business.

  • by oldBroker 14/08/2013 9:52:47 AM

    Commissions will rise only if the percentage of broker-initiated deals increases to (I think) around the 75% range as opposed to the 40% currently.
    The lenders don't owe us a living and they reduced the commissions because they can. It's a fairy-tale to think otherwise. CBA eliminated first year trail and their market share remained stable. Simple supply and demand.